occurrences
The company released its 2019 mid-year report, achieving total operating income of 568 million yuan in the first half of the year, an increase of 97.19% over the previous year; net profit attributable to shareholders of listed companies was 33 million yuan, an increase of 6.69% over the previous year; net profit after deducting non-return to the mother was 23 million yuan, an increase of 16.61% over the previous year.
Demand for military goods has been released and delivery conditions have improved, and performance can be expected
The company's military goods business is mainly equipment development and security. It achieved revenue of 105 million yuan in the first half of the year, an increase of 45.14% over the previous year, and the gross profit margin was 47.70%, down 1.5 pct from the previous year, and remained at a high level. There has been a marked improvement in the military goods business, mainly due to the release of downstream demand and the improvement in delays in the delivery of military goods. As the main supplier of aircraft assembly units, the company uses mature airborne equipment for various types of aircraft and helicopters, and has made major breakthroughs in equipment development. As military aircraft are assembled at an accelerated pace and the finalization and mass production of new models of equipment, the airborne equipment business will show rapid growth; delays in ATE equipment delivery have improved, and performance can be expected.
The civilian goods side strengthens the expansion of epitaxial mergers and acquisitions, and synergies will gradually become apparent
The aviation maintenance and service business achieved revenue of 457 million yuan in the first half of the year, up 115.88% year on year; gross margin was 22.02, down 10.38 pct year on year. The main reason for the sharp increase in consumer goods revenue was the merger of MMRO (the company completed the MMRO acquisition at the end of April 2018). Furthermore, during the reporting period, the company strengthened external mergers and acquisitions. The acquisition of DMH B.V. through MMRO can complement MMRO's business advantages. After the acquisition is completed, the company will have the ability to maintain most narrow-body aircraft/wide-body aircraft routes. At present, the company's aviation maintenance business has expanded from airborne equipment maintenance to base maintenance and route maintenance, etc., and synergies are expected to gradually develop, increasing the company's business.
Profit forecasting and investment advice
It is estimated that the company will achieve operating income of 1,1666/1388/1,573 billion yuan in 2019/20/21, net profit of 0.80/1.29/177 million yuan respectively, EPS is 0.33/0.54/0.74 yuan respectively, and the corresponding PE is 53/33/24 times, respectively. Profit forecasts for 2019-2021 were lowered due to late ATE delivery and uncertainty about the release of new orders. In view of the inflection point in military goods performance, the civilian goods side is stepping up outreach mergers and acquisitions, and there is great potential for synergies, giving it a “buy” rating.
Risk warning
The delivery of military goods and the release of new orders fell short of expectations; the expansion of civilian goods fell short of expectations.